The grand financial recovery myth – 8 charts reflecting the true beneficiaries of four years of taxpayer bailouts. Transfer payments make up 22 percent of household income and public debt surpasses annual GDP.
While the economy is recovering in raw GDP terms the working and middle class Americans are having a smaller and smaller piece of the pie. The recovery is disproportionately flowing to a tiny fraction in our population and largely is based on targeted bailouts to the financial sector. After four full years of bailouts and transfers to the banking sector it is clear that the inflation of the stock market has occurred only because of government support of failed banks (many who are now reaping profits overseas). This also explains why unemployment is still stubbornly high and each month we keep shattering records for those receiving food stamps. The upcoming decade if we continue down this path may be known as the great middle class swindle. The evidence is rather conclusive that the current safety net resurrected by taxpayers has largely benefitted the same banking system that has led us down this unfortunate financial path. Let us examine 8 charts regarding the current state of the economy.
Chart #1 – U.S. household income
U.S. household income is rarely brought up in the press. The reason of course is that household income has gone absolutely nowhere for an entire decade. Instead of focusing on this the media chooses to focus on fleeting stories that have little impact on the daily lives of Americans and serve more as mere sideshows and distractions. While the cost of education, food, fuel, and other daily goods have soared to the stratosphere the wages that pay for these goods has shrunk. Those who were able to stash money away in the stock market have seen practically no returns over the decade. And why would they? The big money to be had is in hedge funds where many make bets on a failing economy and profit handsomely. The buy and hold investors thinks that purchasing a stock is largely a long-term investment and this is what they are conditioned to believe. In reality, you have high frequency traders and hedge funds making billions of dollars on quick trades that have little impact on long-term sustainability and actually create crisis over the long-term. With no income growth, that same paycheck is being eaten up by the cost of more expensive goods and the volatility of the market soars.
Chart #2 – Transfer payments
Source: Of Two Minds
Transfer payments include welfare (financial aid), social security, and other subsidies by the government to certain businesses (i.e., ethanol). I was amazed to see the above chart. Government transfers now make up 22% of household income, a record amount. Keep in mind this is happening at a time when the economy is supposedly recovering. What the above chart is telling us is that more and more people unable to find work in the regular economy are depending on a variety of government payments. Unlike the banks however, who needed taxpayer bailouts to continue financing their yachts and gambling lifestyle many of the above are using the funds to pay for food and basic necessities. The fact that we are reaching a debt ceiling is troubling and we are clearly down an unsupportable road. Bottom line is the money has run out a long time ago and all of this is now being financed on debt.
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